budgeting - practice assessment 1, task 1.4

Ladies and Gentleman, can anyone help me please!!!
its task 1.4b in practice assessment 1 of budgeting, its regarding how to calculate Variable Production Overheads. The answer is 6600

Thanks in advance

Sara

Comments

  • LearningAcademyLearningAcademy Posts: 18Registered
    Hi Sara

    1) Variable production OH is based on labour hours (as per the info given).
    2) Total labour hours for the year are: 17500 (210000 unit produced x 5 minutes / 60 minutes).
    3) Variable production OH rate, therefore, works out to be: £4.40/labour hour (£77000/17500)
    4) For the month of April, labour hours required would be: 1500 (18000 units x 5 minutes / 60 minutes).
    5) Applying the charge rate as worked out in point (3) above, variable production OH for April would be £6600 (1500 x £4.40).

    Trust, this helps
    Regards
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